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December 5, 2017
TABLE OF CONTENTS
LIST OF TABLES 2
CHAPTER I 3
CHAPTER II 6
CHAPTER III 18
MAJOR PROBLEMS 18
Identify the problem/s that significantly affect/s the operation of the industry 18
Specific Actions Done or Doing by the Industry to Address/Remedy the Problem/s 19
Specific government policy/ies to address the problem/s (Laws, Republic Acts, etc.) 20
Discussion on the Strengths and Limitations of the Above Actions by the Industry and the
Government 20
CHAPTER IV 22
BIBLIOGRAPHY 23
APPENDIX 25
1
LIST OF TABLES
Table 1 Gross Revenue of Oceanic Container Lines, Inc. for the period 2011-2015 6
Table 2 Growth Rate of Oceanic Container Lines, Inc. for the period 2011 - 2015 6
Table 3 Gross Revenue of Lorenzo Shipping Corp. for the period 2011-2015 7
Table 4 Growth rate of Lorenzo Shipping Corp. for the period 2011-2015 7
Table 5 Gross Revenue of NMC Container Lines, Inc. for the period 2011-2015 8
Table 6 Growth Rate of NMC Container Lines, Inc. for the period 2011-2015 8
Table 7 Growth Rate of the Total Domestic Shipping Industry for the
period 2011-2015 9
Table 8 Gross Revenue Summary of the Total Domestic Shipping
Industry for the period 2011-2015 9
Table 9 Market Share of the Total Domestic Shipping Industry for the
period 2011-2015 10
Table 10 Income Forecast of Oceanic Container Lines, Inc. for the
period 2016-2020 11
Table 11 Forecasted Growth Rate of Oceanic Container Lines, Inc. for the
period 2016-2020 11
Table 12 Income Forecast of Lorenzo Shipping Corp. for the
period 2016-2020 11
Table 13 Forecasted Growth Rate of Lorenzo Shipping Corp. for the
period 2016-2020 12
Table 14 Income Forecast of NMC Container Lines, Inc. for the
period 2016-2020 12
Table 15 Forecasted Growth Rate of NMC Container Lines, Inc. for the
period 2016-2020 13
Table 16 Income Forecast of the Domestic Shipping Industry for the
period 2016-2020 13
Table 17 Forecasted Growth Rate of the Domestic Shipping Industry for the
period 2016-2020 13
2
CHAPTER I
BACKGROUND AND HISTORICAL ACCOUNT
The Philippines, being an archipelagic country, has made way for the shipping
industry to flourish. Corbett & Winebrake (2008) mentions that transportation has been
called one of the four cornerstones of globalization, along with communications,
international standardization, and trade liberalization. Considering the topography of
Philippines, shipping is the primary means of interisland transport may it be passengers
and/or cargo. Interisland transportation is important as it is the less costly mode of
transportation of goods in terms of ton-mile haulage (Austria, 2003).
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and Acapulco, Mexico. The trade made way for Far East products to get to Mexico in
exchange for Mexican silver and other high value commodities. It lasted for more than
200 years where it was abolished in 1813. In 1869, the Suez Canal was opened and it
encouraged shipping in different parts of the world, that includes Asia. The shipping
industry in the Philippines broadened when Negros Navigation was established in 1932. It
was only during the 1970s that other shipping companies were established along with
Sulpicio Lines and Lorenzo Shipping Corp. that was founded in 1973.
Different personalities are engaged in the domestic shipping industry but there
are powerful people who had done the industry a great cause. Policies and regulations
were made by the administration of Former President Fidel V. Ramos who gave an
executive order in November 1994 that gave way to the shipping industry a guideline and
regulation for its operations.This order are mostly consist of the rates of price the service
that the shipping companies will be providing the community. Routes regulation for the
ships was also mention in the executive order.
Many major events had been conducted related to the shipping industry in the
Philippines. Modernization of ships and ports had been done by different companies and
also different sectors of the government in different regions and islands of the Philippines.
Ports were modernized in every certain province that improve the trade of different goods
in different places. It made the market more flexible that can benefit the market. DSMP 1
(Domestic Shipping Modernization Program) helped different companies to upgrade their
ships for the safety of the public. DSMP also wanted to make sure that every shipping
company meet the standards and policies of the government.
One of the best impact was when Japan worked with Philippines to lend private
companies loan for new ships. Increase of people acquiring the different services of ships
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companies need to add and improve their ships to provide for the people so japan and
philippines work together to lend different shipping companies a loan that is suitable for
the companies to have the ability to meet the standards of a current time.
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CHAPTER II
PERFORMANCE OF THE INDUSTRY
This chapter will present the forecast of the industry and the previous
performance of the top three chosen companies in the industry. Growth forecast of the
company will also be provided in this chapter.
In the Business World Top 1,000 Companies in the Philippines for the years 2011
to 2015, he top companies in the domestic shipping industry are (1) Oceanic Container
Lines, Inc., (2) Lorenzo Shipping Corp., and (3) NMC Container Lines, Inc. These
companies provide interisland water freight transport.
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clients with all shipping and cargo requirements such as trucking, hauling, brokerage,
equipment rental, container freight services, cargo consolidation and container yard
operations.
Table 1. Gross Revenue of Oceanic Container Lines, Inc. for the period 2011-2015 (P million)
The gross revenue of Oceanic Container Lines, Inc. for the year 2011 was
P1.764B. For 2012 it increased to P1.996B and in 2013 the gross revenue increased
further to P2.175B. For 2014 the gross revenue was P2.267B and lastly for 2015 it was
P2.581M. For the years 2011 to 2015, the gross revenue of Oceanic Container Lines, Inc.
continuously increased.
Table 2. Growth Rate of Oceanic Container Lines, Inc. for the period 2011-2015
The growth rate of Oceanic Container Lines, Inc. for 2011-2012 and 2012-2013
was 13.15% and 8.97% respectively. For 2013-2014, the company grew by 4.23% and for
2014-2015, OCLI earned 13.85% more than the past year. For the years 2011 to 2015,
the growth rate of Oceanic Container Lines, Inc. was fluctuating with an average growth
rate of 10.05%.
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Lorenzo Shipping Corp.
Lorenzo Shipping Corporation (LSC) started in 1972 and has been in the business
for already 45 years. It has already proven that it is one of the leading players in the
containerized shipping industry through its experience. L
SC's capabilities are further
Table 3. Gross Revenue of Lorenzo Shipping Corp. for the period 2011-2015 (P million)
The gross revenue of Lorenzo Shipping Corp. for the year 2011 was P1.777B. For
2012 it increased to P1.838B and in 2013 the gross revenue increased further to
P1.926B. For 2014 the gross revenue was P2.060B and lastly for 2015 it was P2.313B.
For the years 2011 to 2015, the gross revenue of Lorenzo Shipping Corp. continuously
increased.
Table 4. Growth Rate of Lorenzo Shipping Corp. for the period 2011-2015
The growth rate of Lorenzo Shipping Corp. for 2011-2012 and 2012-2013 was
3.43% and 4.79% respectively. For 2013-2014, the company grew by 6.96% and for
2014-2015, LSC earned 12.28% more than the past year. For the years 2011 to 2015, the
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growth rate of Lorenzo Shipping Corp. was increasing with an average growth rate of
6.87%.
Table 5. Gross Revenue of NMC Container Lines, Inc. for the period 2011-2015 (P million)
The gross revenue of NMC Container Lines, Inc. for the year 2011 was P1.797B.
For 2012 it increased to P1.956B and in 2013 the gross revenue increased further to
P2.006B. For 2014 the gross revenue was P2.260B and lastly for 2015 it dropped to
P2.228B. The gross revenue of NMC Container Lines, Inc. continuously increased up to
2014 and decreased in 2015.
Table 6. Growth Rate of NMC Container Lines, Inc. for the period 2011-2015
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The growth rate of NMC Container Lines, Inc. for 2011-2012 and 2012-2013 was
8.85% and 2.56% respectively. For 2013-2014, the company grew by 12.66% and for
2014-2015, NMC earned -1.42% more than the past year. For the years 2011 to 2015,
the growth rate of NMC Container Lines, Inc. was fluctuating with an average growth rate
of 5.66%.
Domestic Shipping Industry
The next table shows the growth rate of the total domestic shipping industry.
Table 7. Growth Rate of the Total Domestic Shipping Industry for the period 2011-2015
For the year 2011 to 2012, the growth rate is very high with 109.40% and it dipped
down to 0.51% the following years 2012 to 2013. In 2013 to 2014 the growth rate
increased to 12.15% and for 2014 to 2015 it decreased to -45.19%. The growth rate of
the total domestic shipping industry is fluctuating considering the figures shown above.
B. Market Share
The upcoming tables will show the gross revenue of the total domestic shipping
industry and the market share of each company.
Table 8.Gross Revenue Summary of the Total Domestic Shipping Industry for the period 2011-2015
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NMC 1,797 1,956 2,006 2,260 2,228
Table 9 shows the gross revenue summary of the top 3 companies and the total
domestic shipping industry for the years 2011 up to 2015.
Table 9. Market Share of the Total Domestic Shipping Industry for the period 2011-2015
Market Share
For the year 2011, the three companies combined was only a fourth of the industry
with a market share of 25.9%. In 2012, the three companies in total reached only 13.41%
combined. For the year 2012, the combined market share of the the three companies was
14.07%. In 2014 and 2015, the combined market share of the three companies were
13.53% and 26.70% respectively. The combined market shares of the three companies
are fluctuating.
C. Forecasting
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The top three (3) companies incomes and growth rates for the years 2016 to 2020
have computed forecasts. The succeeding tables will show the forecasted incomes and
growth rates.
The forecasted gross revenue for 2016 is P2.728B. For 2017 and 2018 is P2.919B
and P3.109B respectively. Lastly the forecasted gross revenue for the years 2019 and
2020 is P3.300B and P3.490B respectively. The forecasted gross revenues for the years
2016 to 2020 is increasing.
Table 11. Forecasted Growth Rate of Oceanic Container Lines, Inc. for the period 2016-2020
OCLI 2015 - 2016 2016 - 2017 2017 - 2018 2018 - 2019 2019 - 2020
The forecasted growth rate of Oceanic Container Lines, Inc. for 2015-2016 and
2016-2017 is 5.7% and 6.98% respectively. For 2017-2018, the company grew by 6.53%
and for 2018-2019, OCLI earned 6.13% more than the past year. Lastly, for 2019-2020
the company grew by 5.77%. For the years 2016 to 2020, the growth rate of Oceanic
Container Lines, Inc. first increased from 2015 to 2016 and then is started to decrease
with an average growth rate of 6.22%.
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Lorenzo Shipping Corp.
Table 12. Income Forecast of Lorenzo Shipping Corp. for the period 2016-2020 (P million)
The forecasted gross revenue for 2016 is P2.371B. For 2017 and 2018 is P2.500B
and P2.630B respectively. Lastly the forecasted gross revenue for the years 2019 and
2020 is P2.759B and P2.889B respectively. The forecasted gross revenues for the years
2016 to 2020 is increasing.
Table 13. Forecasted Growth Rate of Lorenzo Shipping Corp. for the period 2016-2020
LSC 2015 - 2016 2016 - 2017 2017 - 2018 2018 - 2019 2019 - 2020
The forecasted growth rate of Lorenzo Shipping Corp. for 2015-2016 and
2016-2017 is 2.51% and 5.46% respectively. For 2017-2018, the company grew by
5.18% and for 2018-2019, LSC earned 4.92%. Lastly, for 2019-2020 the company grew
by 4.69%. For the years 2016 to 2020, the growth rate of Lorenzo Shipping Corp. first
increased from 2.51% to 5.46% and then it started to decrease starting 2016-2017 with
an average growth rate of 4.552%.
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The forecasted gross revenue for 2016 is P2.399B. For 2017 and 2018 is P2.516B
and P2.632B respectively. Lastly the forecasted gross revenue for the years 2019 and
2020 is P2.749B and P2.866B respectively. The forecasted gross revenues for the years
2016 to 2020 is increasing.
Table 15. Forecasted Growth Rate of NMC Container Lines, Inc. for the period 2016-2020
NMC 2015 - 2016 2016 - 2017 2017 - 2018 2018 - 2019 2019 - 2020
The forecasted growth rate of NMC Container Lines, Inc. for 2015-2016 and
2016-2017 is 7.68% and 4.86% respectively. For 2017-2018, the company grew by
4.63% and for 2018-2019, NMC earned 4.43% more than the past year. Lastly, for
2019-2020 the company grew by 4.24%. For the years 2016 to 2020, the growth rate of
NMC Container Lines, Inc. was decreasing with an average growth rate of 5.168%.
For the year 2016, the forecasted income for the industry is P41.787B and
P43.547B for the year 2017. In 2018, it increased to P45.307B. In the years 2019 and
2020 it further increased to P47.068B and P48.828B, respectively. The income of the total
domestic shipping industry is increasing.
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Table 17. Forecasted Growth Rate of the Domestic Shipping Industry for the period 2016-2020
Domestic 2015 - 2016 2016 - 2017 2017 - 2018 2018 - 2019 2019 - 2020
Shipping
The forecasted growth rate of the industry for 2015-2016 and 2016-2017 is 56.65%
and 4.21% respectively. For 2017-2018, the industry’s growth rate decreased to 4.04%
and for 2018-2019, the industry’s growth rate further decreased to 3.89%. Lastly, for
2019-2020 the industry grew by 3.74%. For the years 2016 to 2020, the growth rate of the
domestic shipping industry is decreasing. The industry may still increase in their income
but the industry is not growing anymore.
Oceanic Container Lines, Inc., Lorenzo Shipping Corp. and NMC Container Lines,
Inc. provide water freight transport services. These shipping lines do not offer passenger
transport but cater freight or cargo services.
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NMC Container Lines, Inc.
NMC Container Lines, Inc. provide Full Container Line Shipping, 3rd Party
Logistics, Warehousing, Distribution, Tankering, Petroleum Barging, Marine Bunkering,
Ship Management, Brokerage, and Terminal Services.
Monopolistic Competition
Monopolistic competition means that the company have the same services
produced but it only differs on the perception and interest of the customers. It is a
monopolistic competition industry because all of them provide almost the same services
but influences to the people differs. It is also free market that can make any company go
in and out but it requires a large amount of investment and capital to belong in the
industry. The industry sets their own price that depends in their own cost and profit
margin.
The degree of competition in the domestic shipping industry is high because all of
the shipping companies cater to the mass. The shipping companies have identical
services which gives it a high degree of competition because the customers would just
have to choose which company to support and promote. Having the same services in the
shipping industry would mean customers would take on companies who give quality
services for a minimal cost.
The pricing of the shipping industry is set by the different ship companies. But
costs are being computed and then applied to the guidelines provided by the government
especially on commercial ships that provide more people with the service. Rate
discounting is one of the pricing behavior that this industry uses. The government
regulates the rate but these rates are sometimes used as benchmarks. The company
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uses the rates as a base from which to discount. The government is the rate dictator for
the domestic shipping industry but it is still the company who is the price setter. Top
companies may set the price but it will be easily matched by lowering the rates of other
competing companies. The best strategy for the company is to be the number one in
terms of quality service.
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CHAPTER III
MAJOR PROBLEMS
A. Identify the problem/s that significantly affect/s the operation of the industry
Domestic shipping lines still experiences some problems that affect their
operations. Some problems that they face are (1) old and ageing vessels, (2) restrictive
government regulations, (3) lack of better port facilities. Companies in the industries also
experience some threats such as fuel costs, taxes, port efficiency, interest rates, and high
insurance premiums. (Lorenzo, 1997)
Airline Industry
Airline industry is now a threat to the shipping industry because they almost
produce the same services but the airline industry cannot perform some of the current
services of the shipping industry. But the airline industry can perform a particular service
that they both provide much more efficient and better.
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B. Specific Actions Done or Doing by the Industry to Address/Remedy the
Problem/s
Some port improvements are on process on different parts of the Philippines. Most
of the ports still needs improvement and renovation to provide quality service to the
community and to decrease port congestion. New safety regulations from the government
is being cascaded in the Philippines for the modernization of the shipping industry. Old
rotting ships will be removed especially ships that do not live up with the standards of the
government will be removed. Subsidy from the government is being conducted for the
building of new ships. In a news article by Agcaoli (2014) stated that the infrastructure
and computer systems along with new equipments and maintaining the ISO certification,
congestion will soon be a problem from the past. In order to do that, Harbor Center Port
Terminal Inc. (HCPTI) seeks to use a bulk conveyor system in order to accommodate
more ships and cargo. Furthermore, Philippine shipping lines agreed to cut prices for
cargos and passengers (Almonte, 2015)
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Domestic Shipping Modernization Program
DSMP is administered by the Development Bank of the Philippines and was
funded by Japan. There are two phases of the program. The first phase
(1995-2000) is for the modernization of interisland vessels. The second phase
(1999-2005) is for the development of port facilities in rural areas.
Continuous improvement of regulations and projects from the government can help
boost the growth of the industry. Help from the government is needed from this industry
because of the high capital needed for its operations. Renovations of ports in different
parts in the Philippines can benefit the industry and make transactions and services
better. Subsidy from the government is a big help for the improvement and growth of the
industry. Setting a much higher standard for the modernization of the ships is a great
move for the industry because it can attract more customers. Domestic shippings
competitiveness will be improved against the current international companies in the
industry. This can be helpful to the industry as long as shipping companies can adopt
through that regulation. Purchasing of new ship can be costly that can cost the shipping
companies a lot of money. Loans can help the companies improve much faster and better
but loans from banks nowadays are expensive and have higher interest rates.
Government shall work with the shipping companies regarding the loans for a lesser
interest and so that the companies will have lesser cost in its operation because of the
lesser pay for the ships monthly amortization.
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CHAPTER IV
AREAS FOR FUTURE POLICY PRESCRIPTIONS AND RECOMMENDATIONS
This industry will be helping the Filipino if the present inconvenience is out of the
picture. Old shipping vessels should be replaced and be modernized to live up the
standards of the people in this time. If replacing the vessels is too expensive, companies
should upgrade their ships and renovate them to live up with the standards of the
government and the public. This action can attract more people to acquire their services
because new ships or good looking ships are more trustworthy than old rusty ships.
Restrictive government rules and regulation restrict some of the abilities of the
shipping companies especially rules and regulations that affect the pricing of their
services that is a big burden for the shipping companies. The government is a big
problem for this industry especially the corruption which is currently occurring here in the
Philippines. The companies should request for the government for help especially on
development of the ports in different regions in the Philippines and also loans that can
benefit the companies because of the need of high capital in this industry.
Teaming up with different companies can also give ways to the whole industry new
opportunities like helping each other for discovering new and faster routes to a certain
destination. This can make transportation much faster and easier for the shipping
company that can improve their efficiency in their operations. Operating 24 hours service
can actually benefit the industry because of the traffic and different port congestion that is
occurring. Working with the government for the different ports in the philippines can be
beneficial for the growth and improvement if the industry.
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BIBLIOGRAPHY
Agcaoli (2014) North Harbor operator allots P200 M to upgrade facility. Retrieved from:
http://www.philstar.com/business/2014/12/07/1399849/north-harbor-operator-allots
-p200-m-upgrade-facility
Almonte (2015) PH Domestic SHipping lines agree to cut cargo, passenger rates.
Retrieved from:
https://www.portcalls.com/ph-domestic-shipping-lines-agree-to-cut-cargo-passenge
r-rates/
Austria (2003) Philippine Domestic Shipping Industry: State of Competition and Market
Structure. Philippine Journal of Development, Makati City.
Corbett & Winebrake (2008) The Impacts of Globalisation on International Maritime
Transport Activity. Global Forum on Transport and Environment in a Globalising
World.
DBP (2015) Domestic Shipping Industry. Retrieved from:
https://devbnkphl.com/UserFiles/Domestic%20Shipping%20Industry%2001212015
.pdf.
Gamboa (2017) Good news, bad news on ROROs. Retrieved from:
http://www.philstar.com/business/2017/09/12/1738132/good-news-bad-news-roros
LLanto et al. (2012) The Impact of Trade Liberalization and Economic Integration on the
Logistics Industry: Maritime Transport and Freight Forwarders.
Lucas (2017) Biz Buzz: Shipping industry standoff. Inquirer. Retrieved from:
http://business.inquirer.net/235534/biz-buzz-shipping-industry-standoff
Logistics Industry: Maritime Transport and Freight Forwarders. Philippine Journal of
Development. Vol 39.
Lorenzo (1998) The Domestic Shipping Industry of the Philippines: A situation report.
Manila: Maritime Industry Authority, Domestic Shipping Office.
Lorenzo (n.d) Lorenzo Shipping Corporation. Retrieved from:
http://www.lorenzoshipping.com/index
22
Maritime Industry Authority. (2009). Revised Rules and Regulations Implementing
Republic Act No. 9295, Entitled "An Act Promoting the Development of Philippine
Domestic Shipping, Shipbuilding, and Ship Repair and Ship Breaking, Ordaining
Reforms in Government Policies Towards Shipping In the Philippines and For
Other Purposes.". Retrieved from
http://www.marina.gov.ph/policies/RA/Revised%20IRR%20of%20RA%209295.pdf
MSL (n.d) Full Container Liner Shipping. Retrieved from:
http://www.msl.com.ph/services/main/1/full_container_liner_shipping
Oceanic (n.d) Our Company. Retrieved from:
http://www.oceanic.ph/index.php?option=com_content&view=article&id=1&Itemid=
102.
Ordonez (2016) Port congestion, traffic and agriculture. Inquirer. Retrieved from:
http://business.inquirer.net/205923/port-congestion-traffic-and-agriculture
Philippine Institute of Development Studies (n.d) Industry Structure and Competitiveness
INTER-ISLAND FREIGHT SHIPPING Retrieved from:
https://dirp3.pids.gov.ph/ris/taps/tapspp9821.pdf
Sebastian (2014) The Philippine Shipping Industry in the Maritime World.
Philippine Statistics Authority. (2013). 2010 Annual Survey of Philippine Business and
Industry (ASPBI) - Transport and Storage : Final Results. Retrieved from
https://psa.gov.ph/content/2010-annual-survey-philippine-business-and-industry-as
pbi-transport-and-storage-final
Philippine Statistics Authority. (2016). 2013 Annual Survey of Philippine Business and
Industry (ASPBI) - Transport and Storage : Final Results. Retrieved from
https://psa.gov.ph/sites/default/files/attachments/itsd/specialrelease/2013%20aspbi
_sectHTbl2_0.pdf
Philippine Statistics Authority. (2015). 2012 Annual Survey of Philippine Business and
Industry (ASPBI) - Transport and Storage : Final Results. Retrieved from
https://psa.gov.ph/sites/default/files/attachments/itsd/specialrelease/2013%20aspbi
_sectHTbl2_0.pdf
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APPENDIX
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